Note: This update reflects new information tied to the purchase price and PP metric of KXOS-FM’s purchase by Meruelo Media.
LOS ANGELES — On May 22, Downey, Calif.-based Meruelo Media acquired a radio station serving Southern California that many media brokers and observers long expected. The privately held owner of radio and TV stations serving the L.A. DMA is buying KXOS-FM 93.9.
What was unknown until now was just how much — or how little — Meruelo is paying for the station formerly known as KZLA.
We now know what Meruelo paid a U.S. subsidiary of Grupo Radio Centro for the property.
It was one of the worst-kept secrets in the radio business: Meruelo Media’s L.A. expansion was set for the first half of 2019, with the independently owned entity adding two FM stations to its Southland holdings.
The first was KLOS-FM, acquired from Cumulus Media.
The second, as correctly predicted, is KXOS.
The seller is “93.9 Holdings Inc.” and its Mexico City-based parent’s U.S. subsidiary, Grupo Radio Centro Los Angeles.
With the sale, KXOS joins a mix of broadcast TV and radio stations comprised of unaffiliated Spanish-language stations KBEH-TV and KWHY-TV; Classic Hip-Hop simulcast partners KDAY-FM/KDEY-FM 93.5; Rhythmic Top 40 KPWR-FM “Power 106”; and recently acquired Rocker KLOS-FM 95.5.
The price Meruelo agreed to, however, was the biggest unanswered question.
A Form 314 filing posted today (5/28) confirms it got another steal of a deal in the Southland.
Meruelo is paying $35 million for KXOS.
Specifically, Meruelo is paying $34 Million for the operating assets of the station, plus an additional $1 Million for the existing LMA between GRC and “93.9 Holdings, Inc.”
KXOS has had this LMA in place for several years, and it contains most of the station’s intellectual property, but not its license.
A $5 million escrow agreement has been made to Raul Zuñiga of Commerce Escrow Company of Los Angeles.
The “low” sale price of KXOS will certainly have tongues wagging, and brokers shuddering.
What Meruelo paid for KLOS-FM 95.5 from Cumulus Media was the subject of much concern regarding that deal valuation.
Once a crown jewel in the ABC Radio family, KLOS had — like other Cumulus stations once owned and operated by ABC — fallen behind competitors, for various reasons. Even with the demise of KSWD-FM 100.3 “The Sound,” a Classic Rock competitor sold by Entercom to meet FCC local ownership limits following its merger with CBS Radio, KLOS failed to significantly grow its market share of listeners and ad dollars. Market observers noted its lengthy stop sets and commercial “clutter.”
On April 16, with word of Meruelo’s KLOS purchase already on the street, a Form 314 filing with the FCC proved to be a bombshell for media brokers and other owners seeking to sell radio stations.
How so? Meruelo bought KLOS from Cumulus for $43 million.
At least two media brokers who spoke with RBR+TVBR expressed concern that the “low” sale price for KLOS will ravage future valuations for brokers, buyers and sellers. However, a source close to the matter said the deal makes sense for both Meruelo and Cumulus Media.
“The price is reflective of the amount of EBITDA — or said otherwise, cash flow — that a station generates multiplied by the ‘multiple,’” the source said. “The reason that Power 106 sold for more is simply that it that did much more cash flow.”
But, how much cash flow Power 106 actually did under Emmis ownership was not revealed. “There is no way to tell if the multiple Cumulus got was relatively better or worse than their multiple,” the source said. “The two situations aren’t comparable.”
According to one L.A. market observer, KLOS “must have been down to three to four times cash flow and Meruelo paid 10x cash flow.”
David Schutz, President of Seattle-area Hoffman Schutz Media Capital, also did the math. “The sale of KLOS marks a new low in the population pricing metrics for major market FM stations, particularly for a station with an established brand identity,” he told RBR+TVBR in April.
As a grandfathered “Super Class B” facility on Mt Wilson, KLOS’s 60-dbu contour covers 16,436,000 people. With the $43 million sale price, this works out to a population metric of “only” $2.62/PP, Schutz says. “In comparison, Cumulus’ sale of what was essentially a license only for WPLJ-FM 95.5 in New York had a metric of $3.39/PP,” Schutz said.
Emmis’ May 2017 sale of KPWR had a metric of $6.01/PP.
Now, brokers will start to question what the sale of KXOS for $35 million now means for FM station valuations across markets big and small.
Early speculation had a deal in place at a value between $37 million and $40 million.
KXOS is coming off its best overall ratings finish in months, earning a 1.3 rating 6+ in the April 2019 Nielsen Audio ratings for Los Angeles.
KXOS is presently airing regional Mexican programming and is branded as “Radio Centro 93.9” and is anchored by El Show del Ratón in mornings. It is a Class B facility operating from Mt. Wilson and benefits from a 250-watt booster in the Santa Clarita Valley, home to Valencia and Six Flags Magic Mountain.
Grupo Radio Centro outright acquired KXOS in June 2012, following the inception of a seven-year local marketing agreement with Emmis established in April 2009 that gave GRC the opportunity to purchase the station during the LMA period.
The call option was struck by Grupo Radio Centro, with a purchase price for KXOS of $85.5 million agreed to with seller Emmis Communications.
That’s roughly $2 million more than what Meruelo paid for KLOS.
As such, GRC could wind up selling KXOS for half of what it paid to grab it.
As KXOS, GRC installed a Spanish AC format. It didn’t catch on, and in November 2012 the entire air staff was dismissed ahead of a change in presentation to what is best-described as mainstream Top 40 based on Mexico’s music charts.
This lasted until the January 2014 move to its current programming mix, albeit without original “Radio Centro 93.9” morning host Ricardo “El Mandríl” Sanchez.
As “Radio Centro,” GRC also had a foul freeway ride in Southern California. In August 2015, former GM Sean O’Neill, office manager Rosa Ambriz and 50 employees sued El Mandríl and GRC’s L.A. subsidiary after their termination, following an investigation into ratings tampering and the presence of undocumented immigrants on the KXOS payroll.
Before GRC took control of KXOS, it was known as Rhythmic AC KMVN, the last on-air home for Rick Dees in morning drive. This format ran from Aug. 17, 2006 through April 15, 2009. Interestingly, the change to KMVN came at the exact moment VNU had closed on its purchase of Radio & Records and merger with Billboard Radio Monitor. With this move, R&R Nashville Bureau Chief Lon Helton exited in protest of the merger’s discontinuation of Mediabase 24/7 airplay data for chart compilation, in favor of VNU’s Nielsen BDS services.
Before “Movin'” arrived, KMVN was the home of Country KZLA, which firmly established itself in L.A. in 1983 following the demise of KHJ-AM 930 and KLAC-AM 570.
KXOS, like KLOS, is a “Super Class B” facility with its antenna on Mt. Wilson, more than 5,500 feet above downtown Los Angeles.
According to Hoffman Schutz Media Capital President Schutz, the 60-dbu signal of KXOS covers 13,562,000 people. “This is a metric of $2.58/PP, which is slightly lower than the $2.62/PP metric for KLOS,” he says, noting that this metric is based on the $35 million price.
